The struggle of small firms to retain high-skill workers: Job duration and importance of knowledge intensity

Hugo Castro-Silva () and Francisco Lima
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Hugo Castro-Silva: Universidade de Lisboa

No 2021.08, Working Papers from International Network for Economic Research - INFER

Abstract: In the knowledge economy, skilled workers play an important role in innovation and economic growth. However, small firms may not be able to keep these workers. We study how the knowledge-skill complementarity relates to job duration in small and large firms, using a Portuguese linked employer-employee data set. We select workers displaced by firm closure and estimate a discrete-time hazard model with unobserved heterogeneity on the subsequent job relationship. To account for the initial sorting of displaced workers to firms, we introduce weights in the model according to the individual propensity of employment in a small firm. Our results show a lower premium on skills in terms of job duration for small firms. Furthermore, we find evidence of a strong knowledge-skill complementarity in large firms, where the accumulation of firm-specific human capital also plays a more important role in determining the hazard of job separation. For small firms, the complementarity does not translate into longer job duration, even for those with pay policies above the market. Overall, small knowledge-intensive firms struggle to retain high skill workers and find it harder to leverage the knowledge-skill complementarity.

Keywords: knowledge intensity; technology; firm size; small firms; job duration; skills (search for similar items in EconPapers)
JEL-codes: A1 (search for similar items in EconPapers)
Pages: 51 pages
Date: 2021
New Economics Papers: this item is included in nep-bec, nep-cse, nep-eur, nep-hrm, nep-knm, nep-lab, nep-sbm, nep-tid and nep-ure
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Journal Article: The struggle of small firms to retain high-skill workers: job duration and the importance of knowledge intensity (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:inf:wpaper:2021.08

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